Bill Harris founded Facilitated Systems in 1999 to help people by helping the organizations in which they spend so much of their time. He uses a number of approaches to help them make sense of the puzzles and problems organizations face.

Wednesday, July 21, 2010

A question about growth

Perhaps you can help me make constructive sense of several relatively recent threads:

When you look at all of these messages together, what thoughts do you have?

For those of you without current employment, I'm seriously not trying to prolong your agony. I wonder, though, if growth and jobs have to be linked the way we sometimes think they are. Can we figure out a way to get jobs for people that also reduces the potential for future unemployment?

5 Comments:

The sticky point for all of these discussions is what economies do versus what nations do. Whoever said that economies limit themselves along political lines? Why is it assumed that the national level is the appropriate level to analyze economic activity? Take away the idea of nation-states, and just look at economics from the perspective of city-regions and globalization.

On the Oil Drum blog, Daly says that GDP should be rethought. What about the political unit that it is examined at? Are you really telling me that economic activity in Dubuke has more of an influence on the economy of Manhattan than does Toronto or London? Really?

First, when people talk about GDP recovery, they usually seem to mean consumption recovery. Consumption recovery can't really happen, because the level of consumption in the 2000s was funded by deficits. (Well, it could happen, with even more drawdown of assets or accumulation of debt, but that would be worse in the long run.

Second, and relevant to Dave's comment, a lot of what passed for GDP or value added in the last decade or two could be transient effects of opening markets. Capital is mobile and labor isn't. The influx of cheap goods inflates profits (until prices equilibrate) but deflates wages. The result is perhaps somewhat GDP-neutral, but has a harmful effect on income distribution, making the downturn more painful for the median than the mean earner. That may not be a reversible situation either.

A decent solution to both problems might be to just print a boatload of money. That rewards debt holders over the prudent, which is a bummer. But the imprudent are dragging all of us down, so it's perhaps not a bad trade. Also, the resulting inflation and dollar depreciation allows those countries running industrial and trade policies that lead to big dollar surpluses to finance some of the recovery.